— CPUC opens rulemaking on apportioning wildfire liability costs
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Moody's, S&P both downgraded PG&E
California utility regulators agreed to examine how to divide the costs of wildfire liability between utilities and ratepayers so that safe and adequate electricity service is not impaired.
The proceeding, which the Public Utilities Commission decided to open Thursday, applies to all electric utilities under the PUC's jurisdiction.
But it will likely have the biggest impact on PG&E Corp. subsidiary Pacific Gas and Electric Co., which faces billions of dollars in potential liabilities from the state's catastrophic wildfires and is seeking to pass the cost of those damages on to its ratepayers.
The PUC opened a rulemaking to develop a "stress test" for deciding how to apportion wildfire liability costs between utilities and ratepayers. The proceeding is likely to be lengthy, however, and may have less impact on PG&E shareholder confidence than action in the state legislature, which has just opened a new session.
On Thursday, Moody's became the second major credit agency to downgrade PG&E's credit rating, following S&P Global Ratings' earlier downgrade, and the company's stock slid another 8% in after-hours trading.
Utilities and financial interests are watching for regulatory and legislative developments that might help PG&E, which has experienced a dramatic share price plunge and is reportedly considering filing for bankruptcy protection.
Assemblyman Chris Holden is expected to introduce legislation soon that would allow PG&E to issue bonds, secured with ratepayer revenues, to cover liabilities looming from the November 2018 Camp Fire, the most deadly and destructive wildfire in the state's history.
SENATE BILL 901
The PUC proceeding would implement Senate Bill 901, which the legislature passed in September 2018 to reduce wildfire threats and compensate victims. Among other things, the law requires the PUC to determine the maximum amount utilities can pay for wildfire damages without impairing reliable electricity service.
PUC President Michael Picker, who introduced the Thursday order, stressed it is narrowly focused on meeting S.B. 901. The proceeding will develop methods for implementing the legislature's mandate, he said.
The proceeding "doesn't address any specific fire and it doesn't result in any determination on the amount of money a utility will be responsible for," Picker said. "It is solely focused on methodology and it is going to be used by the commission in a future wildfire cost recovery proceeding by a utility ... so it is an important piece of a larger puzzle on wildfire issues."
Picker said the PUC has also been implementing the new law in other ways, including focusing on wildfire mitigation plans, opening a separate proceeding on utilities' plan to de-energize power lines when dry and windy conditions make them susceptible to igniting fires, and addressing consumer-protection concerns during emergencies.
The commissioners unanimously approved the wildfire cost methodology proceeding amid loud chants by protesters holding "No PG&E Bailout" signs. Before the vote, many of the protesters spoke in opposition to the PUC taking any steps to compensate PG&E for wildfire liability costs. -- Jeff Stanfield, S&P Global Market Intelligence, email@example.com
-- Edited by Keiron Greenhalgh, firstname.lastname@example.org